Skip to main content
SpringerLink
Log in

Financial crises: past and future

  • Speech
  • Published:
Business Economics Aims and scope Submit manuscript

Abstract

This article takes a selective global tour of some of the prominent economic and financial risks in advanced, emerging, and low-income developing economies. The primary emphasis is on near-term risks. The discussion covers areas where vulnerabilities have either already become manifest, or those where risks are mounting but have not yet sounded a glaring alarm. For the advanced economies, the topics cover aspects of the recent surge in collateralized lending obligations in the United States and Europe that are reminiscent of the pre-crisis boom in mortgage-backed securities as well as Italy’s unresolved debt overhang. On emerging markets (EMs) and developing economies, the themes cover the curious case of the missing defaults (2011–2018); global factors and EM turbulence; and China’s international lending to low-income countries and its consequences. A brief discussion of some persistent medium-to-long-term concerns about the rising levels of US public debt and the tensions that arise from internal economic objectives and the external pressures associated with the US dollar’s role as the world’s principal reserve currency completes the discussion.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Fig. 1
Fig. 2
Fig. 3
Fig. 4
Fig. 5
Fig. 6
Fig. 7
Fig. 8

Similar content being viewed by others

Notes

  1. Target2 balances are the reserve-clearing accounts among the European System of Central Banks. The overdraft in the Bank of Italy’s account corresponds essentially to a surplus in that of the Bundesbank.

  2. See Reinhart et al. (2016, 2017) for details.

  3. The Greek restructuring of privately held debt is already included among the default/credit event episodes.

  4. Reinhart et al. (2017) discuss this literature.

  5. The VIX, which was not as prevalent in finance at the time, was not among the external indicators examined in the Calvo, Leiderman, and Reinhart paper.

  6. LEBACS are short term, domestic currency securities issued by Argentina’s central bank. Large bunching of amounts coming due escalated roll-over risk, market illiquidity, and currency weakness at various points during 2018.

  7. Portugal, like Ireland, had some of its officially-held debt restructured in 2011.

References

  • Bernanke, Ben, 2005. The Global Saving Glut and the U.S. Current Account Deficit. Sandridge Lecture, Virginia Association of Economists, March 10 (Governor Bernanke presented similar remarks with updated data at the Homer Jones Lecture, Federal Reserve Bank of St. Louis, Missouri, on April 14, 2005.).

  • Bredenkamp, Hugh, Ricardo Hausmann, Alex Pienkowski, and Carmen Reinhart. 2019. Challenges Ahead. In Sovereign Debt: A Guide for Economists and Practitioners, eds. Ali Abbas, Alex Pienkowski, and Kenneth Rogoff. London: Oxford University Press.

    Google Scholar 

  • Caballero, Ricardo, Emmanuel Farhi, and Pierre-Olivier Gourinchas. 2008. Financial “Whac-a-Mole”: Bubbles, Commodity Prices, and Global Imbalances. Brookings Papers on Economic Activity Fall: 1–68.

  • Calvo, Guillermo, Leonardo Leiderman, and Carmen M. Reinhart. 1993. Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors. IMF Staff Papers 40 (1): 108–151.

    Article  Google Scholar 

  • Farhi, Emmanuel, Pierre-Olivier Gourinchas, and Hélène Rey. 2011. Reforming the International Monetary System. London: Centre for Economic Policy Research.

    Google Scholar 

  • Fratzscher, Marcel. 2012. Capital Flows, Push Versus Pull Factors and the Global Financial Crisis. Journal of International Economics 88 (2): 341–356.

    Article  Google Scholar 

  • Ilzetzki, Ethan, Carmen M. Reinhart, and Kenneth S. Rogoff. 2019. Exchange Rate Arrangements in the 21st Century: Which Anchor Will Hold? Quarterly Journal of Economics forthcoming (May). (Also National Bureau of Economic Research Working Paper 23134, February 2017). 

  • International Monetary Fund. 2018. World Economic Outlook, April.

  • Johns Hopkins University, China Africa Research Initiative (CARI).

  • Jordà, Òscar, Moritz Schularick, and Alan M. Taylor. 2011. Financial Crises, Credit Booms, and External Imbalances: 140 Years of Lessons. IMF Economic Review 59 (2): 340–378.

    Article  Google Scholar 

  • Obstfeld, Maurice. 2013. The International Monetary System: Living with Asymmetry. In Globalization in an Age of Crisis: Multilateral Economic Cooperation in the Twenty First Century, ed. Robert C. Feenstra and Alan M. Taylor. Chicago: University of Chicago Press.

    Google Scholar 

  • Reinhart, Carmen M., Vincent R. Reinhart, and Christoph Trebesch. 2016. Global Cycles: Capital Flows, Commodities, and Sovereign Defaults, 1815–2015. American Economic Review 106 (5): 574–580.

    Article  Google Scholar 

  • Reinhart, Carmen M., Vincent R. Reinhart, and Christoph Trebesch. 2017. Capital Flow Cycles: A Long Global View, paper presented at the Eighteenth Jacques Polak Annual Research Conference, International Monetary Fund.

  • Reinhart, Carmen M., and Christoph Trebesch. 2016. The International Monetary Fund: Seventy Years of Reinventing Itself. Journal of Economic Perspectives 30 (1): 3–28.

    Article  Google Scholar 

  • Reinhart, Carmen M., and Kenneth S. Rogoff. 2009. This Time is Different: Eight Centuries of Financial Folly. Princeton university press.

  • Reinhart, Carmen M., and Kenneth S. Rogoff. 2014. Recovery from Financial Crises: Evidence from 100 Episodes. American Economic Review 104 (5): 50–55.

    Article  Google Scholar 

  • Reinhart, Carmen M., Kenneth S. Rogoff, and Miguel A. Savastano. 2003. Debt Intolerance. Brookings Papers on Economic Activity, Spring: 1–74.

  • Rey, Hélène. 2015. Dilemma not Trilemma: The Global Financial Cycle and Monetary Policy Independence. In Proceedings, Federal Reserve Bank of Kansas City.

  • Triffin, Robert. 1969. Gold and the Dollar Crisis: The Future of Convertibility. New Haven: Yale University Press.

    Google Scholar 

  • World Bank. International Debt Statistics.

Download references

Author information

Authors and Affiliations

  1. Harvard University, Cambridge, USA

    Carmen M. Reinhart

Authors
  1. Carmen M. Reinhart
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Carmen M. Reinhart.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Based on the Adam Smith Lecture delivered at the NABE Annual Meeting, Boston, September 30, 2018. This paper was written while a John H. Makin Visiting Scholar at the American Enterprise Institute. I wish to thank Vincent Reinhart and NABE conference participants for useful comments and suggestions.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Reinhart, C.M. Financial crises: past and future. Bus Econ 54, 3–15 (2019). https://doi.org/10.1057/s11369-018-00113-4

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1057/s11369-018-00113-4

Keywords

Search

Navigation